NAB, CTIA and carriers squabble over FCC's simulations of 600 MHz auction

The wireless industry and the National Association of Broadcasters are at loggerheads over the FCC's process as it plans for next year's incentive auction of 600 MHz broadcast TV spectrum. NAB voiced its strong opposition to a recent public notice the FCC issued on simulations of the auction, while CTIA and several wireless carriers said the notice represented a step in the right direction.

In the public notice, which was released by the Incentive Auction Task Force on May 20 and open for public comment through yesterday, the FCC released data from incentive auction simulations, based on different assumptions of how much spectrum broadcasters would give up. The notice focused on how best the FCC could free up most spectrum for wireless carriers while at the same time creating the least amount of post-auction interference, or impairment, between broadcasters remaining on air and the carriers.

As Broadcasting & Cable notes, the scenarios the FCC explored include freeing up 85 MHz of broadcast spectrum (if 40 percent to 50 percent of broadcasters participated), 114 MHz (50-60 percent), and 126 MHz (60 to 70 percent). Those percentages are not how many total broadcasters will give up spectrum but just the percentage of those that participate in the auction.

Importantly, instead of accommodating impairments up to 20 percent, the simulations applied a standard of up to (but not equal to) the equivalent of one license block nationwide, as measured by weighted population.

Commissioner Ajit Pai, one of the two Republicans on the five-member commission, strongly objected to the proposal. He noted in a statement last month that the FCC had initially proposed last December "that the initial clearing target would allow up to 20% of spectrum nationwide to be impaired. But today's Public Notice does not simulate that approach. Instead, it analyzes clearing targets based on an impairment methodology that the Commission never considered, let alone proposed. Back in December, I noted the arbitrary nature of the Commission's 20% figure and suggested that we take a different path.  But my concern was rejected out of hand, and on a party-line vote the Commission voted to plow ahead with the 20% proposal. Curious, then, that the proposal is now treated like a black sheep."

The 20 percent figure had come under sharp criticism from the wireless industry as being too high and it said it was arbitrary.

In its response, the NAB said that the public notice "represents a step backwards in our shared goal of holding a successful incentive auction in 2016. The proposed new standard not only fails to materially lower market variability, it may increase it for certain spectrum recovery targets."

NAB noted that the FCC previously proposed to seek a "near-nationwide" band plan by limiting impairments to wireless licenses to those covering no more than 20 percent of weighted population nationally. "The Public Notice, however, seeks comment on simulations conducted using a different standard, one allowing up to the equivalent of one impaired license block nationwide, as measured by weighted population," NAB notes. "Unfortunately, the Public Notice provides no further detail as to how the Commission might use this standard in conducting the auction. That information is essential if parties are to comment effectively. For example, does this standard replace the proposed 20 percent standard? Or, will this standard be used only to set an initial spectrum clearing target? That is, will additional variability, up to 20 percent, be permitted if the use of Dynamic Reserve Pricing forces the Commission to assign additional television stations to channels located in the wireless portion of the band? The Public Notice also provides little information concerning the simulations and the results themselves. For example, how many simulations did the staff run?"

The incentive auction will consist of two main parts: The first is a "reverse" auction, in which broadcasters agree to sell their spectrum rights. After the reverse auction, the spectrum will then be moved around or "repacked" based on which stations relinquish their spectrum. Then the FCC will conduct a more traditional "forward" auction in which carriers and other entities bid on the spectrum licenses.

Sprint (NYSE: S), in comments to the FCC, said it "considers the simulations and data contained in the recently-released Public Notice an important step in focusing the record in the above-captioned proceeding towards refinements that will maximize spectrum availability while improving bidder certainty and reducing impairments."

T-Mobile US (NYSE:TMUS) said the "Task Force's simulations of the initial clearing target optimization procedures for the incentive auction represent an important and welcome contribution to the record of how the Commission intends to conduct the incentive auction."

Meanwhile, in its filing, CTIA said that the public notice represents "an excellent first step in allowing interested stakeholders the opportunity to better understand the amount of impairments that may be expected on 600 MHz licenses."

CTIA wants the FCC to "continue to investigate alternatives to the '20 percent impairment"' proposal originally included in the Auction 1000 Public Notice. "The Auction Simulation Public Notice apparently signals movement from the Commission to potentially reduce or eliminate the national 20 percent impairment threshold – a result that CTIA and its members strongly support," CTIA wrote.

In order to conduct the simulations, the FCC's staff had to make certain assumptions about protection of foreign TV stations, but due to insufficient data, the simulations did not reflect any interference from Mexican TV stations into the United States. "We anticipate the Commission will have the data necessary to make these calculations in advance of the incentive auction, however," the public notice stated in a footnote. "We note that including the predicted interference from Mexican stations would increase the impairment level in each of the scenarios"

CTIA wants the FCC to "provide auction simulations based on the best available data on Mexican impairments" and also thinks the agency "should work with Mexico to obtain more accurate information on the protected broadcast television stations in an expeditious fashion. Confirmed and updated Mexican television impairment data will be useful to potential auction participants making decisions about spectrum assets."

NAB said that the fact that Mexican TV stations' impact on interference was not included is "puzzling" for two reasons. "First, at least one party, AT&T, has been able to estimate the effects of impairments from Mexican television stations. Plainly, it is possible at least to estimate Mexican impairments at this time," NAB wrote. "Second, the effects of these impairments may be quite significant, and is likely to increase."

FCC Chairman Tom Wheeler said last month "we're making great progress with both Mexico and Canada. We'll be able to run simulations based on that data. This is a fluid process."

For more:
- see this FCC public notice 
- see this Broadcasting & Cable article
- see this NAB filing
- see this T-Mobile filing
- see this Sprint filing
- see this CTIA filing

Related Articles:
FCC moving forward with basic 600 MHz auction framework, but spectrum reserve remains unclear
AT&T study finds less than 20% interference in 600 MHz band from Mexican and Canadian TV stations
Sprint, T-Mobile, Dish join forces with others to press FCC on incentive auction rules
FCC seeks comment on new rules that would block a replay of Dish's AWS-3 auction bidding strategy
T-Mobile, Sprint and Dish push for 40 MHz spectrum reserve in 600 MHz auction
FCC tentatively sets price of $1.25 per MHz-POP on 600 MHz spectrum for 'reserved' bidding to start in incentive auction